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Economic flare-ups may be once again taking their toll on small business lending.

Both supply and demand of small business loans dropped for the first time this year in April.

The Biz2Credit Small Business Lending Index found that loan approvals by big banks (those with more than $10 billion in assets) dropped from 10.9% in March to 10.6% in April. In March 2011, the approval rate was 11.6%.

It may not be a huge drop but perhaps more concerning is that loan approvals at small banks (with less than $10 billion in assets) also fell. That may be more telling of the lending environment since generally small banks have been more willing to lend to small businesses. In April however small bank lending fell to 45.9% from 47.6% in March.

The situation wasn't much better at credit unions where loan approvals decreased by 0.5% to 46.6% "at a time when they are making a push to increase the lending limit to 27.5% of their assets," Biz2Credit says.

"The disappointing April jobs report in which only 115,000 new jobs were created, and when the expectation was much higher, is an indication that the economy is slowing down. High oil prices as well as the European crisis intensifying have combined to cause both borrowers and lenders to proceed with caution," says Rohit Arora, CEO of Biz2Credit. " The flow of capital may be slowing, which is a cause of concern."

From the report:

Another sign of the slowing economy is that the overall demand for small business loans in April was down by 5.4% , slipping for the first time in a year. Further, the 12-month window for SBA's enhanced 90% loan guarantees concluded, which slowed SBA lending activity reported by banks that make SBA-backed loans. Additionally, the guarantee fee (usually 1-3 % of the loan amount) was no longer waived, which increases the cost of taking out a loan.

A report today from The National Federation of Independent Business's index shows small business optimism was up slightly in April but there's more to the story. The 2 points increase in the optimism index brings it to 94.5 which makes up for the 2 points it lost in March bringing the index back to February 2011's level.

"April was a good report, lots of positive changes, but unfortunately leaving us in the same place we were in February of last year. So, a year with no progress. Most encouraging were long awaited gains in positive sales and profit trends, a key ingredient to any recovery on Main Street," the NFIB said in its report.